Massachusetts as a Regional Laboratory to Control Health

Spending

Stuart H. Altman Ph.D.Chaikin Professor of Health Policy

Heller School for Social Policy and Management

Brandeis University

In 1971 U.S. Healthcare Spending Was $75 Billion and

Accounted for 7.5% of GDP

Today Healthcare Spending Exceeds $3.2 Billion and Consumes Over 18%

of GDP

Internationally We Far Outpace Other Countries In

Per Capita Spending

Relative to the size of its wealth, the U.S. spends a disproportionate amount on health care

But Interestingly Much Of The International Gap is Related

to Only Two Periods

Since 1980, the gap has widened between U.S. health spending and that of other countries

As Healthcare Consumes an Ever Larger Percentage of National Income It Reduces The

Capacity of Government, Individuals and Business To Spend on Other Goods and Services

Is There a Limit???

What Is The Major Factor Driving Increases In Health Spending?

• Is It We Use Too Many Expensive Services? Or

• Are Prices To High for The Services We Use?

Many Argue That The U.S. Provides Too Many Healthcare Services That Are Wasteful or

Harmful

In 1971 Dr. Bob Brook From The Rand Corporation Estimated That 40% of

Healthcare is Either Useless or Harmful!

We Still Here The Same Story Today and Surprisingly The Same

Percentage of Waste!

Sure Limiting Waste and Harmful Care Is Important BUT---

In Recent Years Most Research Suggests It is Higher Prices Not More

Utilization That Is Driving Medical Spending

Major Factors Generating Growth in

Healthcare Spending 1996-2013

-20%

0%

20%

40%

60%

80%

100%

30%

12%

-2.40%-2.50%

63%Price and Intensity

Service Utilization

Disease Prevelence

Aging

Population

Factors Associated With Increases in US Health Care Spending 1996-2013, Dielman et al, JAMA October 2017

Price Increases Driving Spending Growth (2014)

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

-2.7%-0.9% -1.3%

-15.6%

3.1%4.6% 5.6%

3.1%

28.1%

3.3%Utilization

Prices

Source: Health Care Cost Institute, “2014 Health Care Cost and Utilization Report”

Is It Possible To Constrain Prices Without Direct Regulation of Prices

Lets Turn To Massachusetts

State Develops Regional Programs to Promote More Efficient and Less

Expensive Health Care System

Note: Income data reported in 2014 dollars.

Sources: American Community Survey (income data); Center for Medicare and Medicaid Services (per capita health spending)

State Healthcare Spending in Massachusetts Among The Highest Even

Accounting for High Income

Healthcare spending per capita and median household income, by state, 2014

In 2006 Massachusetts Passed a Universal Health Insurance Law

Primarily Expanded Health Insurance Coverage to Low-Income Uninsured---Left to

Later Legislation Need to Focus on High Medical Costs

In 2012 Massachusetts Legislated a Health Care Spending Law

• Established a State-Wide Limit on Total Healthcare Spending (Benchmark)– Equal To Long-term Growth in State Income

• Created New Quasi State Agencies (Each With Separate Staffs and Budgets)

– CHIA---Center for Health information and Analysis• Collect and Publish Detailed Cost and Quality Information by

Provider and Payer

– HPC ---Health Policy Commission• Run by 11 Independent Commissioners (only Two From State

Administration

What Separates Massachusetts From Other States (Except Maryland)---State is Concerned About TOTAL Healthcare Spending Not Just Medicaid Spending

This Is Becoming More Important as Gap Between Private Spending and

Government Grows!

Hospital Paid Significantly Higher Amounts By Private Insurance

106%

125%

160%175%

100%90% 90% 85%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

1996 1998 2000 2002 2004 2006 2008 2010 2012

Pvt Ins. Paytas Percent ofMedicarePayments

MedicarePayt. GrowthRate

Seiden et al, Health Affairs December 2015

Payments in $2012 and adjusted for patient mix and geography

HPC Required to Issue a Cost and Market Report on Any Merger or Acquisition That Has the Potential to Substantially Increase Total Spending, or Lower

Access or Quality

Make Recommendation to State (Certificate-of-Need) or Attorney General (Ant-Trust) for Activities That Could Add Significant Cost

Growth

Health Policy Commission (HPC) Also Monitors Total Healthcare Spending

HPC Required to Hold Annual Cost Trends Hearing and Issue Report on

Major Cost Drivers

HPC Also Engages in Several Activities Designed To Improve Delivery System• Invested $150 Million in Lower Cost Community

Hospitals to Improve Care and increase Efficiency• Promoted Higher Use of Lower Cost Community

Health Systems• Established an ACO and Patient Centered

Certification Program (Used by State Medicaid Program)

• Promoted Alternative Payment Systems • Issued Several Reports on Reasons for Higher

Spending in State

Healthcare Spending in Massachusetts: Compared to

Benchmark and U.S.

Overall Total Healthcare Spending in State Slightly Under the Benchmark

for the Period 2012-2016

And Massachusetts Is Doing Better Than The U.S.

Annual growth in per-capita healthcare spending, Massachusetts and the U.S, 2000 – 2017

Notes: US figures for 2017 are partially projected.Sources: Centers for Medicare and Medicaid Services, National Healthcare Expenditure Accounts Personal Health Care Expenditures Data (U.S. 2015-2017) and State Healthcare Expenditure Accounts (U.S. 2000-2014 and MA 2000-2014); Center for Health Informationand Analysis Annual Report THCE Databook (MA 2015-2017)

In Particular, Private Insurance Spending Which Has Been Fueling Health Spending is Growing Less Rapidly in Massachusetts vs U.S.

Commercial spending growth,Massachusetts and the US, 2007-2017

Notes: US data includes Massachusetts. US and MA figures for 2017 are partially projected.Sources: Centers for Medicare and Medicaid Services, National Healthcare Expenditure Accounts Personal Health Care Expenditures Data (U.S. 2015-2017) and State Healthcare Expenditure Accounts (U.S. 2000-2014 and MA 2000-2014); Center for Health Information and Analysis Annual Report TME Databook (MA 2015-2017)

As a Result

Growth in Total Healthcare Spending in The State Among the Lowest in

Nation

Massachusetts healthcare spending grew at the 4th lowest rate in the US

from 2009-2014

Average annual healthcare spending growth rate, per capita, 2009-2014

Source: Centers for Medicare and Medicaid Services, State Health Expenditure Accounts, 2009 and 2014

But Massachusetts Still a High Spending State

Our Major Problem is that We Use Expensive Major Teaching Hospitals More Than All Other

States and More Than Necessary

Source: Centers for Medicare and Medicaid Services, State Health Expenditure Accounts, 2009 and 2014

Massachusetts no longer spends the most on health care

Personal health care spending, per capita, by state, 2009 and 2014

Massachusetts share of community appropriate discharges by hospital type, 2012-2017

Notes: Discharges that could be appropriately treated in community hospitals were determined based on expert clinician assessment of the acuity of care provided, as reflected by the cases’ diagnosis-related groups (DRGs). The Center for Health Information and Analysis defines community hospitals as general acute care hospitals that do not support large teaching and research programs.Sources: HPC analysis of Center for Health Information and Analysis Hospitals Inpatient Discharge Database, 2012-2017

Inpatient admission rate, MA and the US, 2001-2017

Notes: US data include Massachusetts. Sources: Kaiser Family Foundation analysis of American Hospital Association data (2001-2016), HPC analysis of Center for Health Information and Analysis Hospital Inpatient Database (MA 2017)

Thirty-day readmission rates, Massachusetts and the U.S., 2011-2016

Sources: Centers for Medicare and Medicaid Services (US and MA Medicare), 2011-2016; Center for Health Information and Analysis (MA All-payer), 2011-2016

State Is Focusing on Improving The Efficiency

of Delivery System

Contribution to Excess Spending in Massachusetts, 2009 and 2014

Personal health care expenditures (PHC) are a subset of national health expenditures. PHC excludes administration and the net cost of private insurance, public health activity, and investment in research, structures and equipment. Includes nursing home care, home health care, and other health, residential, and professional care. Includes physician and clinical services, dental services, and other professional services. Source: Centers for Medicare & Medicaid Services; HPC analysis

The rate of emergency department visits has improved, but remains 9%

higher than the U.S.

Emergency department visits, per 1,000 residents, MA and the U.S., 2005, 2010, and 2015

Source: Kaiser Family Foundation analysis of American Hospital Association data, 2005, 2010 and 2015

Can The Massachusetts System Work In Other

States?

Several States Have Contacted Us and Looking Into How To Set Up a

Similar System